Battle of the brands about to begin in Africa

With 54 diverse countries on the continent, even rigorous business plans can run aground on the unique and complex set of circumstances found in each country. Dianna Games, the CEO of Africa @ Work and a columnist for Business Day, has recently compiled a book, Business in Africa: Corporate Insights, that addresses these issues concerning doing business on the continent. Below is an extract.

A billboard for Star beer in Lagos, Nigeria

The battle of the brands is about to begin in Africa, predicts Rick de Kock, Director of Africa Operations for advertising company TBWA\Africa. As the word spreads about the consumer opportunity in a continent of a billion people with rising incomes and high economic growth levels, global brands from all over the world are rushing in.

“The competition for consumer spend is keen and growing,” he says. “Some of the world’s fastest-growing economies are here and international brands want a piece of the action.”

The original driver for TBWA’s African expansion was the movement of South African multinationals into the rest of Africa. “But we started to find that more and more of our global clients wanted to go into the continent and wanted us to work for them in African markets.”

Interest in the consumer markets of Africa is coming from all over the world, he says. “We are seeing more brands from India coming down the east coast of Africa and there are a lot of new brands coming from Europe and America such as Walmart and Yum Brands, which is opening KFC outlets across the continent. There are very few coming from China at this stage but that may change in time. And there are also the African brands. Many of the big African brands have traditionally come out of South Africa but that is also changing as African companies spread their wings out of their traditional local markets.”

Talking to customers

“Consumers are starting to understand that everybody wants to talk to them. With the explosion of new technology, African consumers are more connected to the world than ever before so they have more choice and they know what is good and what isn’t. If you try to sell them rubbish, they’ll know.”

This rapid penetration of technology into Africa has implications for the way business operates. The landing of numerous submarine cables on African shores since 2009 has given the continent vastly increased access to international fibre bandwidth and the numbers of internet users is rising as the technology becomes more affordable. The number of internet users rose from 4.5 million in 2000 to nearly 140 million by 2012 – with 45 million in Nigeria alone. But internet penetration still has not reached beyond seven per cent of the population, so the potential for growth is huge.

The GSM Association, a body that represents the interests of mobile operators worldwide, predicted that the number of mobile phone users in Africa would reach 735 million by the end of 2012.

“We are dealing with a mostly young, dynamic target market that is becoming globally connected through the internet and mobile phones and they are understanding brands a lot more,” says De Kock. “The way we communicate with this market will have to change dramatically. Everyone will have to up their game.”

“With the massive competition for audiences and consumer spend, advertising messages are starting to fade into each other; they are becoming wallpaper. So advertising has to move from being literal to more conceptual in order to stand out.”

“Traditional media such as radio, television and billboard are still key delivery platforms in Africa and they will be for a while. But millions of Africans are now getting their messages from a variety of places. We can’t just run a television advert anymore. We have to ask how we can also start tapping into consumers’ social networks. The model being used in Africa is changing rapidly.”

De Kock says the biggest spenders in African advertising are, by far, the mobile companies, followed by financial services providers and the producers of alcohol products and fast-moving consumer goods (FMCG). The fastest growing spend is in the alcohol and FMCG industries.

As more and more multinationals arrive in Africa they will challenge local brands, De Kock predicts. “The challenge for African marketers is to build local brands to the point where they become pan-African and even global brands. There are very few pan-African brands currently that don’t come from South Africa.”